Employee Retirement Income Security Act created an individual retirement arrangement—usually referred to simply as an IRA—to encourage taxpayers who were not participants in an employer-sponsored qualified retirement plan to save money to fund their future retirement needs. In order to participate, you needed to be employed and not a participant in a pension, profit-sharing or other qualified plan.
These early ERISA provisions offering tax benefits to individuals funding IRAs have been extended in subsequent legislative actions to:
- unemployed spouses
- qualified retirement plan participants
- taxpayers preferring tax-free distributions instead of deductible contributions
Since that earlier ERISA expansion related to IRAs, new IRAs have been added, including Roth IRAs that offer tax-free qualified distributions rather than deductible contributions. In order to differentiate the newer Roth IRA from its earlier cousin, the original IRA is now referred to as a “traditional” IRA.
Upon conclusion of this course, students will be able to:
- apply the rules governing eligibility for and contributions to traditional and Roth IRAs
- identify the requirements and benefits related to a spousal IRA
- apply the tax treatment rules concerning contributions to and distributions from traditional and Roth IRAs
- distinguish between traditional and Roth IRA distribution rules
Tax Year: 2020
CPAs, EAs, and other tax professionals